 Difference between Goods and Services:

 Goods: Tangible outputs like automobiles, eyeglasses, and refrigerators.

Produced in factories or other settings like farms and restaurants.
 Services: Intangible acts, like a physician's examination, lawn care, or auto
repair. Services often involve direct interaction between the provider and the
customer.

 Categories of Services:

 Professional services (e.g., financial, healthcare, legal).

 Mass services (e.g., utilities, Internet, communications).
 Service shops (e.g., tailoring, car wash, appliance repair).
 Personal care (e.g., beauty salons, spas, barbershops).
 Government services (e.g., police, fire, social services).
 Education (e.g., schools, universities).
 Food services (e.g., catering).
 Internal services (e.g., payroll, maintenance, IT).
 Retailing and wholesaling.
 Transportation and delivery (e.g., trucking, airlines).
 Residential services (e.g., lawn care, painting, interior design).
 Travel and hospitality (e.g., hotels, resorts, travel agencies).
 Miscellaneous (e.g., temporary help, copy services).

 Key Comparisons between Goods and Services:

 Customer Contact: Services often involve more direct customer contact, which
creates a "moment of truth" for customer judgment. Manufacturing typically has
less direct customer interaction.

 Labor Content: Services often have a higher degree of labor content, while
manufacturing can be more automated.

 Uniformity of Inputs: Service inputs tend to vary more, making operations more
complex. Manufacturing has more uniform inputs.

 Productivity Measurement: Measuring productivity is harder for services due to

variability in inputs (e.g., doctors handling routine vs. difficult cases).

 Quality Assurance: More challenging for services because delivery and

consumption happen simultaneously. Manufacturing allows for corrections before
the customer sees the product.

 Inventory: Services typically don't involve physical inventory and must be

delivered on demand. Manufacturing often relies heavily on inventory.
  Wages: Manufacturing jobs tend to have less wage variation, while service jobs
range from high-paid professionals to minimum-wage workers.

 Patentability: Goods are easier to patent, while services are more difficult to
protect from competition.

 Similarities between Goods and Services Management:

Although goods and services differ in what is done, managing them involves many
similar principles, including resource allocation, quality control, and efficiency
improvement.
---------------------------

Why learning operation management is important

Operations Management Skills are Valuable:

 Regardless of your major, the skills learned in operations management are useful
for a successful career, as operations affect every aspect of a business.

Operations Impact Every Business Area:

 Operations and sales are the two main line functions in a business, while other
departments (accounting, finance, marketing, IT) provide support to these
functions.

Related Service Jobs:

 Financial Services: Stock market analyst, broker, investment banker, loan

officer.

 Marketing Services: Market analyst, marketing researcher, advertising

manager, product manager.

 Accounting Services: Corporate accountant, public accountant, budget analyst.

 Information Services: Corporate intelligence, library services, management

information systems (MIS) design services.

Employer Expectations:

 Employers seek graduates with a broad understanding of how business

organizations operate, rather than being narrowly focused.

Global Understanding:
  Learning about operations and supply chains enhances understanding of global
dependencies, the reasons behind company successes or failures, and the
importance of collaboration.

Three major Function of business Overlap

 Understanding Roles Across Functions:

 Successful collaboration requires that members of an organization not only

understand their own roles but also comprehend the roles of others, fostering
effective communication and cooperative decision-making.

 Interfacing and Collaboration:

 Functional areas (e.g., finance, marketing, and operations) frequently interact,

exchanging information and making decisions that influence other parts of the
organization.

 Finance and Operations Collaboration:

 Budgeting: Finance helps plan financial requirements, and operations must

adjust and evaluate performance relative to budgets.
 Economic Analysis of Investments: Both functions work together to evaluate
investment options in equipment and facilities.
 Provision of Funds: Careful planning is needed for operations, particularly when
funding is limited, to prevent cash-flow issues.

 Marketing’s Role:

 Sales and Promotion: Marketing is responsible for selling or promoting goods

and services.
 Assessing Customer Needs: Marketing communicates customer preferences to
operations for short-term demand and to design teams for long-term product
improvement.
 Competitor and Consumer Insights: Marketing provides information about
competitors and consumer preferences, aiding in product design and features.

 Operations’ Role in Marketing and Design:

 Operations need marketing information to plan materials and work schedules

based on customer demand.
 Operations give feedback on capacities, manufacturability, and potential new
equipment or skills required for new products or services.

 Collaboration for New Product Development:

  Marketing, operations, and design teams must work together on product and
process design to ensure successful implementation of new products and
improvements.
 Finance provides insights into available funds for product development and what
may be needed in the future.

 Lead Time Communication:

 Operations must provide marketing with realistic lead times for fulfilling customer
orders, ensuring accurate communication with customers.

 Coordination Across Functions:

 All business areas need to manage and coordinate decisions related to supply
chain operations and balancing supply and demand, recognizing how these
decisions affect the overall organization

-----------------------------

Role of Operation Manager

System design and system operation are two essential parts of managing a company’s
operations, and they involve different types of decisions:

1. System Design: These are big, long-term decisions that affect how a company runs.
Examples include:

○ How much capacity the system needs (how many products can be made or
services delivered).
○ Where to build facilities (like factories or offices).
○ How to arrange departments and equipment for efficiency.
○ Planning new products and services.
○ Buying the right equipment to get the job done.
2. These decisions are often strategic, meaning they shape the long-term direction of the
company. They require serious planning because they can impact costs, space, and
quality for years to come.
3. System Operation: These are the daily management tasks that keep the company
running smoothly. Examples include:
 ○ Managing employees.
○ Planning and controlling inventory.
○ Scheduling tasks.
○ Managing projects.
○ Ensuring quality.
4. These are typically more short-term decisions, but they are crucial for day-to-day
success.

Operations managers are usually more focused on system operation, but they also play an
important role in system design because design decisions set the stage for how well operations
can run. For instance, decisions about facility location or equipment can affect how efficiently
workers can do their jobs and how much it costs to run the business.

Operations managers also work closely with other areas:

● Purchasing: Making sure the company has the materials and equipment it needs, when
it needs them. This includes evaluating suppliers for quality and reliability.
● Industrial Engineering: Handling things like scheduling, work standards, and quality
control.
● Distribution: Making sure products get to customers or stores on time.
● Maintenance: Keeping equipment, buildings, and systems in good working order.

The role of the operations manager is critical in any organization, whether it’s a manufacturing
company or a service provider (like a bank). Though different industries may require different
expertise, the management skills required to ensure efficiency and quality remain the same.

Lastly, the service sector (like healthcare, banking, and retail) is growing fast and now accounts
for over 70% of jobs in the U.S. Manufacturing jobs are decreasing, partly because companies
are becoming more efficient and partly because many jobs are outsourced to countries with
lower production costs. However, the key concepts in operations management apply to both
manufacturing and service industries.

Operation Management and Decision making

The main role of an operations manager is to be a planner and decision-maker, directly

influencing how well a company meets its goals. In this role, the operations manager needs to
make careful decisions that often involve several alternatives. Each option can have different
effects on costs, profits, and overall success, making it essential to choose wisely.

Some of the key decisions they make involve the following questions:

● What: What resources (like materials, equipment, and staff) will the company need, and
in what quantities?
 ● When: When will these resources be required? When should tasks be scheduled, and
when should materials be ordered? When is it necessary to take corrective action?
● Where: Where will the work take place? Which locations or facilities will be used?
● How: How will the product or service be designed? How will the tasks be organized and
executed, and how will resources be distributed?
● Who: Who will be responsible for doing the work?

An operations manager must focus on key concerns like managing costs (staying within the
budget), ensuring quality, and keeping to schedules (making sure things happen on time).

To make informed decisions, operations managers use various tools and techniques, including:

● Models: Simplified representations of real situations to help predict outcomes and test
different approaches.
● Quantitative Methods: Using numbers and data to analyze decisions.
● Trade-offs: Weighing the pros and cons of different choices to find the best option.
● Setting Priorities: Deciding what’s most important to focus on.
● Ethics: Considering the right and fair course of action.
● Systems Approach: Looking at the company as a whole and understanding how
different parts work together.

These tools and approaches help operations managers make thoughtful, effective decisions that
align with the company's objectives.

Model
A model is a simplified version of reality used to understand or solve a problem more easily. For
example, a child’s toy car is a model of a real car: it looks similar but doesn’t function the same.
Models help us focus on important details without getting overwhelmed by complexity.

Types of Models:

1. Physical Models: These look like the real thing, such as toy cars, scale-model buildings,
or model airplanes. Their main advantage is their visual similarity to reality.
2. Schematic Models: These are more abstract, like blueprints, charts, or graphs. They
don’t look like the real object but show important features in a simple way. They are easy
to create and modify.
3. Mathematical Models: These use numbers, formulas, or symbols to represent a
situation. They are the most abstract but are often the easiest to manipulate, especially
with computers.

Common Uses of Models:

 ● Decision-making aids: Models simplify complex real-life situations so managers can
focus on the most important parts.
● Testing scenarios: Managers can use models to ask "what-if" questions to predict
outcomes without experimenting in real life.
● Consistency: Models provide a structured and standard approach to analyzing problems.

Benefits of Models:

1. Ease of Use: Models are usually simpler and less expensive than working directly with
real situations.
2. Organized Information: They help organize and quantify information, often revealing
gaps where more data is needed.
3. Problem Understanding: Models make it easier to understand and analyze a problem.
4. What-If Analysis: Managers can test different scenarios to see potential outcomes.
5. Standardization: Models offer a consistent way to evaluate problems.
6. Mathematical Power: They allow users to apply mathematical techniques to solve
problems.

Limitations of Models:

1. Overemphasis on Quantitative Data: Models may focus too much on numbers and
ignore important qualitative factors.
2. Misapplication: Complex models may be used by people who don’t fully understand
them, leading to incorrect results.
3. No Guarantee of Success: Even with the right model, good decisions are not always
guaranteed.

For each model, it’s important to understand:

1. Its purpose.
2. How it generates results.
3. How those results are used.
4. What assumptions or limitations come with the model.

Quantitative Approaches are mathematical techniques used to solve management problems,

often with the goal of finding optimal solutions. These methods help managers make decisions
about how to allocate resources, manage projects, and control operations efficiently. Some key
quantitative techniques include:

1. Linear Programming: A mathematical approach for allocating limited resources in the

best way possible.
2. Queuing Techniques: Used to analyze and manage waiting lines in situations like
customer service or production processes.
3. Inventory Models: Help control and manage stock levels to balance customer service
and costs.
 4. Project Models (PERT & CPM): Tools for planning, coordinating, and controlling large
projects by mapping out tasks and deadlines.
5. Forecasting Techniques: Predict future trends and demand to help with planning and
scheduling.
6. Statistical Models: Widely used in decision-making to analyze data and trends.

These methods have become more popular with the help of computers and software, which can
handle complex calculations quickly. Despite the power of quantitative approaches, managers
often combine them with qualitative approaches—decisions based on experience, judgment,
and non-numerical factors.

Performance Metrics

Managers rely on various metrics to measure and control different aspects of operations.
Common metrics include:

● Profits and Costs

● Quality
● Productivity
● Flexibility (ability to adapt to changes)
● Inventory Levels
● Schedules
● Forecast Accuracy

These metrics help managers track how well their operations are performing and make
adjustments as needed.

Analysis of Trade-Offs

In many decisions, managers must balance different factors, a process called trade-off
analysis. For example, when deciding how much inventory to keep, managers must weigh the
benefit of improved customer service against the cost of storing more inventory. To make better
decisions, they often list the pros and cons of each option and, in some cases, assign weights
to these factors to reflect their importance.

Degree of Customization

The level of customization in products or services affects how a company operates. Highly
customized services like home remodeling or legal advice require more labor and are more
time-consuming than mass-produced or standardized products (like those sold in stores).
Customization often makes operations more complex, impacting costs, scheduling, and
resource allocation.
In summary, operations managers use a mix of quantitative methods, performance metrics, and
trade-off analysis to make informed decisions. The degree of customization in their products or
services also plays a significant role in shaping their strategies and day-to-day management.

System Approach

A systems approach is a way of thinking that views a business or any organization as a

collection of interconnected parts (or subsystems) that must work together efficiently. It's like
looking at the big picture rather than focusing only on one piece. In an organization, these
subsystems might include departments like marketing, operations, and finance. Each of these
smaller parts must function well individually, but the main idea is that when they work together,
they create something greater than just the sum of their parts.

Key Points of the Systems Approach:

1. Interconnectedness: All parts of a system affect one another, and changes in one part
can influence others. For example, if the marketing team runs a new campaign, it might
increase demand, affecting operations and inventory.
2. Focus on the Whole: The overall success of the organization is more important than
the performance of individual subsystems. It's not enough for just one part (like the
operations team) to do well if it negatively affects the rest of the system (like finance or
customer service).
3. Resource Competition: Different subsystems often compete for limited resources (like
budget or staff), so decisions should take the entire system's needs into account rather
than focusing only on one area.

Example:

If a company decides to add a new feature to a car (like antilock brakes), it doesn't just affect
the design department. A systems approach would consider:

● How customers will react to the new feature.

● How to train workers to assemble the new brakes.
● The cost and scheduling of production.
● The impact on quality standards and inventory.
● How marketing will advertise the feature.
● What parts suppliers are needed.
Historical evolution of operations management
The historical evolution of operations management reflects the transition from basic
production techniques to highly efficient, technologically-driven systems that have shaped
modern industries. Here's an overview of the major milestones:

1. Pre-Industrial Revolution:

● Before the Industrial Revolution, goods were primarily produced by craftsmen using
simple tools. This method, known as craft production, involved highly skilled workers
creating custom products one at a time, tailored to customer needs. This approach was
slow, expensive, and did not benefit from economies of scale.

2. The Industrial Revolution (Late 1700s to 1800s):

● Mechanization was the hallmark of the Industrial Revolution, which began in England
and spread to the U.S. and Europe.
● The invention of the steam engine allowed for the replacement of human labor with
machine power, enabling the development of factories and mass production.
● Innovations such as the standard gauging system allowed for standardized parts,
reducing the need for custom-made goods and significantly boosting production
efficiency.
● Factories began to grow, providing jobs to many and fostering urbanization as workers
moved from rural areas to cities.

3. Scientific Management (Late 1800s to Early 1900s):

● Frederick Winslow Taylor, the father of scientific management, introduced

systematic management techniques focused on efficiency, measurement, and work
method improvements.
● Taylor's approach involved studying and analyzing work processes to determine the best
way to perform each task, emphasizing the division of labor between workers and
management.
● However, Taylor's methods were controversial among workers, who sometimes felt
exploited by management's focus on maximizing output without corresponding wage
increases.

Other contributors to the scientific management movement include:

● Frank Gilbreth: Father of motion study, he focused on reducing unnecessary motions to

improve efficiency.
● Henry Gantt: Introduced Gantt charts, a widely-used scheduling tool.
 ● Harrington Emerson: Applied Taylor's principles to organizational structures and
advocated for the use of experts to increase efficiency.
● Henry Ford: A pioneer in mass production, Ford applied Taylor’s ideas in his automotive
factories, revolutionizing the industry with the introduction of the moving assembly line
and interchangeable parts.

4. Mass Production and Fordism (Early 20th Century):

● Henry Ford's Model T revolutionized the automotive industry with mass production,
allowing for large volumes of standardized products to be made at a lower cost.
● Ford used interchangeable parts to streamline the assembly process, reducing the
need for custom-fitting parts and introducing a method where parts could be easily
replaced.
● The assembly line further increased efficiency by moving the product from one worker
to another, each responsible for a specific task, thus reducing the need for highly skilled
labor and speeding up production.

5. Post-War Operations Management (Mid 20th Century):

● After World War II, management theories advanced significantly with the introduction of
quality control, statistical methods, and quantitative approaches. Techniques like
PERT and CPM emerged, helping managers plan and control large projects.
● The Toyota Production System (TPS) pioneered lean manufacturing, emphasizing
waste reduction, continuous improvement, and flexible production systems.

6. Modern Operations Management:

● With the rise of computers in the latter half of the 20th century, quantitative methods
such as linear programming, queuing theory, and inventory models became widely used.
● Automation, robotics, and information systems have allowed businesses to further
optimize operations, focusing on efficiency, flexibility, and customer satisfaction.
● Globalization has also expanded the scope of operations management, with
businesses managing complex global supply chains and seeking efficiencies across
international markets.

Human Relations Movement

The Human Relations Movement shifted the focus from purely technical aspects of
work design, as emphasized in scientific management, to the human element in the
workplace. It recognized that worker motivation and satisfaction are key to improving
productivity. Key contributors and their ideas include:
 Lillian Gilbreth: Worked on the human side of job design, focusing on worker
fatigue and the psychological aspects of work.

 Elton Mayo: His studies at Western Electric's Hawthorne plant revealed that
worker motivation, not just physical and technical factors, plays a crucial role in
productivity.

 Abraham Maslow and Frederick Hertzberg: Developed theories on motivation,

highlighting that meeting workers' psychological needs can enhance
performance.

 Douglas McGregor: Proposed Theory X and Theory Y:

o Theory X: Assumes workers dislike work, need control, and must be
motivated through rewards or punishment.
o Theory Y: Assumes workers enjoy work, seek responsibility, and perform
better when empowered.

 William Ouchi: Introduced Theory Z, which blends Japanese and Western

management styles, emphasizing lifelong employment, teamwork, and collective
problem-solving.